Provide the utility function for consumption and leisure, compute the optimum combination of consumption and leisure.
Mike's utility of consumption and leisure is U(C, L) =C*L, so that his marginal rate of substitution is C/L. There are 168 hours in the week and he earns $10 an hour.
a)What is his optimal combination of C and L?
b) If the government starts a welfare policy that pays B to all non workers and 0 to all workers, at what value of B will Mike opt out of the labor force and go on welfare?